It is a term used to identify the taxpayer who has a tax liability to pay off.
It is a term used to identity the components of the tax liability.
There must be a connecting factor between the State tax authorities and individual/business taxpayer without which a State authority cannot impose its taxing procedures.
A different countries follow different tax procedures binding to its own legal systems and has to define its own connecting factors to compute tax liabilities with respective to tax accounting rules being followed in their countries.
Principles of international taxation
There are two key principles of international taxation are:
- Residence based taxation-An individual taxpayer has to pay his/her taxes based on its worldwide income in the country of his/her residence.
- Source based taxation – A company has to pay its taxes in the source country where it has its business establishments and a source of income is available from those establishments.
A double taxation issues will be in limelight provided that companies have been taxed both in the country of residence and source. The country of residence has the sole rights to exempt a company from double taxation either by:
- Exemption of taxable income in the country of residence or
- Extending credit facilities for taxes to be paid in the country of source.
Sources of international taxation
There are few sources of international taxation that includes:
1.Multilateral international agreements
2.Comprehensive bilateral double tax treaties
3.Limited bilateral double tax treaties
4.Customary and general principles of international law.
Academic Programs- International Taxation
In spite of globalization, international taxation is gaining a huge importance in the academic world. There are several universities around the world offering various levels of programs in international taxation. The lists of those few institutions are given below:
- University of Florida
- Catholic University of Leuven
- University of Sydney
- University of Leiden, Netherlands
- New York University
- Vienna University of Economics and Business Administration
- Other regional universities in different parts of the world
Professional institutions
- International Fiscal Association is a professional organization/institution,
Focusing on the advancement of international and comparative tax law worldwide.
- Tax vista is a knowledge bank source for professionals practicing international taxation as a career.
United States- Taxation policy
United States is one of the most industrialized nations in the world. A taxation policy includes:
- US citizens have to pay taxes for the income earned any parts of the world in comparison to most other countries that’s levying taxes for the income earned by their citizens with in its national borders.
- MNC’s not having any vested business interests in the Unites States are not covered under its tax liability.
- US citizens are having business stake in any one of the foreign entities anywhere in the world; he/she is liable to pay taxes.
Global taxation environment
Current international taxation practices have its own limitations due to globalization and liberalization policies around the world. The challenges include that companies are becoming globalized and taxation polices are within national frontiers unable to address the issues in cross border transactions. There are three ways to respond to this situation like:
- “Isolation” approach
- “Synchronization” approach
- “Integration” approach
Isolation approach - This kind of approach is not feasible in today’s globalised word because no country will be willing to isolate itself from the principles of international taxation and its reforms happening worldwide.
Synchronization approach - In this approach, the government won’t be playing a pivotal role in framing the tax policies in accordance to its social, cultural and economical aspects of its own country because it emphasizes on the common global tax code rule which will be monitored under the supervision of a global tax authority worldwide.
Integration approach-
- This is the right approach to meet the challenges of globalization and liberalization policies in today’s world because the government plays a pivotal role in designing their own tax systems and procedures in accordance to international tax considerations.
- It helps to intensify the co-operation level among cross- border trade taking place in different parts of the world.
- It helps to facilitate information flow to meet up those challenges by putting in place the best transparent systems and best practices followed in the international taxation polices worldwide.
- And also proper mechanism in place to resolve any disputes arising out of it.
Conclusion
In general, international trade and business environment is rapidly undergoing changes due to globalization and liberalization polices. In order to facilitate easy trade between nations, the country’s international taxation polices should exchange and share experiences on best practices in global tax environment collectively to be successful in today’s competitive business environment.
